641 VICTORIA YAU CHU, assisted by her husband MICHAEL CHU, petitioners, vs. HON.
Bank agreed to the encashment, after verbally advising Mrs. Chu of such and
COURT OF APPEALS, FAMILY SAVINGS BANK and/or CAMS TRADING ENTERPRISES,
INC., respondents.
1998 | Grino-Aquino, J. | Cases in relation to PPSA and Concurrence / Preference of
Credits
SUMMARY
Mrs. Chu secured her transactions with Cams Trading with time deposits in Family Savings
Bank. Upon her default of payment, such time deposits were encashed as soon as she gave her
consent to the encashment. Subsequently, Mrs. Chu questioned the encashment stating that it
was form of pactum commissorium and thus, illegal. She further alleged that she had already
paid her obligation.
SC ruled against her on the two issues raised.
DOCTRINE
The encashment of the deposit certificates was not a pacto commissorio which is prohibited
under Art. 2088 of the Civil Code. A pacto commissorio is a provision for the automatic
appropriation of the pledged or mortgaged property by the creditor in payment of the loan upon
its maturity.
Where, as in this case, the security for the debt is also money deposited in a bank, the amount
of which is even less than the debt, it was not illegal for the creditor to encash the time deposit
certificates to pay the debtors' overdue obligation, with the latter's consent.
PROVISIONS
ARTICLE 2088. The creditor cannot appropriate the things given by way of pledge or mortgage,
or dispose of them. Any stipulation to the contrary is null and void. (1859a)
ARTICLE 2112. The creditor to whom the credit has not been satisfied in due time, may proceed
before a Notary Public to the sale of the thing pledged. This sale shall be made at a public
auction, and with notification to the debtor and the owner of the thing pledged in a proper case,
stating the amount for which the public sale is to be held. If at the first auction the thing is not
sold, a second one with the same formalities shall be held; and if at the second auction there is
no sale either, the creditor may appropriate the thing pledged. In this case he shall be obliged to
give an acquittance for his entire claim. (1872a)
FACTS
Case​: petition for review on certiorari to annul and set aside the CA decision in
favor RES in an action to recover the PET’s time deposits in RES Family Savings
Bank
PET Yau Chu has been purchasing cement from Cams Trading since 1980,
guaranteeing her transactions with deeds of assignment of her time deposits​,
in favor of Cams Trading, totaling P320,000 in the Family Savings Bank.
On July 24, 1980, Cams Trading notified the Bank that Chu had an unpaid balance
of P314,639.75. It ​asked that they be allowed to encash the time deposit
certificates.
● They submitted to the Bank a letter from ​Mrs. Chu admitting that her
outstanding balance amounted to P404,500
1
Case is only 2 pages long in cdasia
obtaining her conformity​ thereto
● Bank delivered P283,737.75 to the Bank
● One of the time deposit certificates was not encashed as it lacked the
proper signatures
Mrs. Chu soon demanded that her time deposit be restored. Neither of the entities
(the Bank nor Cams) complied and so she filed a complaint for recovery of sum.
RTC: ​dismissed the complaint for lack of merit
CA: ​affirmed RTC decision
Mrs. Chu alleged that the encashment of her time deposits was ​pactum
commissorium2 (and thus illegal) and that ​she had already paid​ her obligations.
ISSUE
WN there was pactum commissorium— NO
WN her obligation has already been paid— NO, based on CA findings
RULING
The Court of Appeals found that the deeds of assignment were contracts of pledge, but, as the
collateral was also money or an exchange of "peso for peso," the provision in Article 2112 of the
Civil Code for the sale of the thing pledged at public auction to convert it into money to satisfy
the pledgor's obligation, did not have to be followed.
All that had to be done to convert the pledgor's time deposit certificates into cash was to present
them to the bank for encashment after due notice to the debtor.
The encashment of the deposit certificates was not a pacto commissorio which is
prohibited under Art. 2088 of the Civil Code​. A pacto commissorio is a provision for the
automatic appropriation of the pledged or mortgaged property by the creditor in payment of the
loan upon its maturity. The ​prohibition against a pacto commissorio is intended to protect
the obligor, pledgor, or mortgagor against being overreached by his creditor who holds a
pledge or mortgage over property whose value is much more than the debt​.
Where, as in this case, the security for the debt is also money deposited in a bank, the amount
of which is even ​less than the debt, it was ​not illegal for the creditor to encash the time deposit
certificates to pay the debtors' overdue obligation, ​with the latter's consent.
Whether the debt had already been paid as now alleged by the debtor, is a factual question
which the ​Court of Appeals found not to have been proven for the evidence which the debtor
sought to present on appeal, were receipts for payments made prior to July 18, 1980. Since the
p​etitioner signed on July 18, 1980 a letter admitting her indebtedness to be in the sum of
P404,500, and there is no proof of payment made by her thereafter to reduce or extinguish her
debt, the application of her time deposits, which she had assigned to the creditor to secure the
payment of her debt, was proper. The Court of Appeals did not commit a reversible error in
holding that it was so.
2
automatic appropriation by the creditor of the thing pledged or mortgaged upon the
failure of the debtor to pay the principal obligation.
[65] MANILA BANKING CORP. v. ANASTACIO TEODORO,JR. & GRACE ANNA TEODORO
G.R. No. L-53955 | January 13, 1989 | Bidin, J.
SUMMARY: ​Sps. Teodoro and Teodoro, Sr. issued three Promissory Notes in favor of Manila
Banking Corporation, which has a stipulation that any interest due, if not paid at the end of every
month, shall be added to the total amount due while the whole amount bears interest at the rate
of 12% per annum until fully paid. Moreover, Teodoro, Jr. executed in favor of plaintiff a Deed of
Assignment of Receivables from the Emergency Employment Administration in the sum of
P44,635.00. The Deed of Assignment provided that it was for and in consideration of certain
credits, loans, overdrafts and other credit accommodations extended to defendants as security
for the payment of said sum and the interest thereon, and that defendants do hereby remise,
release and quitclaim all its rights, title, and interest in and to the accounts receivables. The
failure of defendants to pay the sums due on the Promissory Notes prompted this action. RTC
ruled against defendants. SC affirmed the RTC decision, holding that the assignment of
receivables does not have the effect of payment of all the loans contracted by defendants from
the bank.
DOCTRINE: ​Assignment of credit is an agreement by virtue of which the owner of a credit,
known as the assignor, by a legal cause, such as sale, dation in payment, exchange or donation,
and without the need of the consent of the debtor, transfers his credit and its accessory rights to
another, known as the assignee, who acquires the power to enforce it to the same extent as the
assignor could have enforced it against the debtor. The character that it may assume determines
its requisites and effects. its regulation, and the capacity of the parties to execute it; and in every
case, the obligations between assignor and assignee will depend upon the judicial relation which
is the basis of the assignment​. ​The character of the transactions between the parties is not,
however, determined by the language used in the document but by their intention.
FACTS:
● On April 25, 1966, defendants, together with Anastacio Teodoro, Sr., jointly and
severally, executed in favor of plaintiff a Promissory Note (No. 11487) for the sum of
P10,420.00 payable in 120 days, or on August 25, 1966, at 12% interest per annum.
Defendants failed to pay the said amount inspire of repeated demands and the
obligation as of September 30, 1969 stood at P 15,137.11 including accrued interest
and service charge.
● On May 3, 1966 and June 20, 1966, defendants Anastacio Teodoro, Sr. (Father) and
Anastacio Teodoro, Jr. (Son) executed in favor of plaintiff two Promissory Notes (Nos.
11515 and 11699) for P8,000.00 and P1,000.00 respectively, payable in 120 days at
12% interest per annum. Father and Son made a partial payment on the May 3, 1966
promissory Note but none on the June 20, 1966 Promissory Note, leaving still an
unpaid balance of P8,934.74 as of September 30, 1969 including accrued interest and
service charge.
● The three Promissory Notes stipulated that any interest due if not paid at the
end of every month shall be added to the total amount then due, the whole
amount to bear interest at the rate of 12% per annum until fully paid; ​and in case
of collection through an attorney-at-law, the makers shall, jointly and severally, pay
10% of the amount over-due as attorney's fees, which in no case shall be leas than
P200.00.
● It appears that on January 24, 1964, the Son executed in favor of plaintiff a Deed of
Assignment of Receivables from the Emergency Employment Administration in the
sum of P44,635.00. ​The Deed of Assignment provided that it was for and in
consideration of certain credits, loans, overdrafts and other credit
accommodations extended to defendants as security for the payment of said
sum and the interest thereon, and that defendants do hereby remise, release
and quitclaim all its rights, title, and interest in and to the accounts receivables.
Further:
○ (1) The title and right of possession to said accounts receivable is to
remain in the assignee, and it shall have the right to collect the same
from the debtor​, and whatsoever the Assignor does in connection with the
collection of said accounts, it agrees to do as agent and representative of
the Assignee and in trust for said Assignee;
○ (9) ​This Assignment shall also stand as a continuing guarantee for any
and all whatsoever there is or in the future there will be justly owing
from the Assignor to the Assignee​ ...
● In their stipulations of fact, it is admitted by the parties:
○ that plaintiff extended loans to defendants on the basis and by reason of
certain contracts entered into by the defunct Emergency Employment
Administration (EEA) with defendants for the fabrication of fishing boats,
and that the Philippine Fisheries Commission succeeded the EEA after its
abolition;
○ that non-payment of the notes was due to the failure of the Commission to
pay defendants after the latter had complied with their contractual
obligations; and
○ that the President of plaintiff Bank took steps to collect from the
Commission, but no collection was effected.
● For failure of defendants to pay the sums due on the Promissory Note, this action was
instituted on November 13, 1969, originally against the Father, Son, and the latter's
wife.
○ Because the Father died, however, during the pendency of the suit, the
case as against him was dismiss under the provisions of Section 21, Rule 3
of the Rules of Court.
○ The action, then is against defendants Son and his wife for the collection of
the sum of P 15,037.11 on Promissory Note No. 14487; and against
defendant Son for the recovery of P 8,394.7.4 on Promissory Notes Nos.
11515 and 11699, plus interest on both amounts at 12% per annum from
September 30, 1969 until fully paid, and 10% of the amounts due as
attorney's fees.
● The RTC ruled against defendants, ordering Anastacio Teodoro, Jr. and Grace Anna
Teodoro jointly and severally to pay the plaintiff. Hence, this petition.
ISSUES w/ HOLDING & RATIO:
[1 - RELEVANT] WON the assignment of receivables has the effect of payment of all the
loans contracted by defendants from the bank - NO
● Assignment of credit is an agreement by virtue of which the owner of a credit,
known as the assignor, by a legal cause, such as sale, dation in payment,
exchange or donation, and without the need of the consent of the debtor,
transfers his credit and its accessory rights to another, known as the assignee,
who acquires the power to enforce it to the same extent as the assignor could
have enforced it against the debtor. It may be in the form of a sale, but at times it
may constitute a dation in payment, such as when a debtor, in order to obtain a
release from his debt, assigns to his creditor a credit he has against a third person, or
it may constitute a donation as when it is by gratuitous title; or it may even be merely
by way of guaranty, as when the creditor gives as a collateral, to secure his own debt
in favor of the assignee, without transmitting ownership. ​The character that it may
assume determines its requisites and effects. its regulation, and the capacity of
the parties to execute it; and in every case, the obligations between assignor
and assignee will depend upon the judicial relation which is the basis of the
assignment​.
● It is evident that the assignment of receivables executed by appellants on January 24,
1964 did not transfer the ownership of the receivables to appellee bank and release
 appellants from their loans with the bank incurred under promissory notes Nos.
11487,11515 and 11699.
● The Deed of Assignment provided:
○ that it was for and in consideration of certain credits, loans, overdrafts, and
their credit accommodations in the sum of P10,000.00 extended to
appellants by appellee bank, and as security for the payment of said sum
and the interest thereon;
○ that appellants as assignors, remise, release, and quitclaim to assignee
bank all their rights, title and interest in and to the accounts receivable
assigned;
○ that the assignment will also stand as a continuing guaranty for future loans
of appellants to appellee bank and correspondingly the assignment shall
also extend to all the accounts receivable; and
○ That appellants shall also obtain in the future, until the consideration on the
loans secured by appellants from appellee bank shall have been fully paid
by them.
● The position of appellants, however, is that the deed of assignment is a quitclaim in
consideration of their indebtedness to appellee bank, not mere guaranty, in view of the
following provisions of the deed of assignment:
○ ...the Assignor do hereby ​remise, release and quit-claim u ​ nto said assignee
all its ​rights, title and interest in the accounts receivable described
hereunder.
○ ...that the title and right of possession to said account receivable is to
remain in said assignee and it shall have the ​right to collect directly from the
debtor,​ and whatever the Assignor does in connection with the collection of
said accounts, it agrees to do so as ​agent and representative of the
Assignee and it ​trust​ for said Assignee.
● The character of the transactions between the parties is not, however,
determined by the language used in the document but by their intention.
● Lopez v. CA​: ​The characters of the transaction between the parties is to be
determined by their intention, regardless of what language was used or what the
form of the transfer was. If it was intended to secure the payment of money, it must
be construed as a pledge. However, even though a transfer, if regarded by itself,
appellate to have been absolute, its object and character might still be qualified and
explained by a contemporaneous writing declaring it to have been a deposit of the
property as collateral security. It has been Id that a transfer of property by the debtor
to a creditor, even if sufficient on its farm to make an absolute conveyance, should be
treated as a pledge if the debt continues in existence and is not discharged by the
transfer, and that accordingly, the use of the terms ordinarily exporting conveyance, of
absolute ownership will not be given that effect in such a transaction if they are also
commonly used in pledges and mortgages and therefore do not unqualifiedly indicate
a transfer of absolute ownership, in the absence of clear and ambiguous language or
other circumstances excluding an intent to pledge.
● Definitely, the assignment of the receivables did not result from a sale transaction.
○ It cannot be said to have been constituted by virtue of a dation in payment
for appellants' loans with the bank evidenced by promissory note Nos.
11487, 11515 and 11699 which are the subject of the suit for collection in
Civil Case No. 78178.
○ At the time the deed of assignment was executed, said loans were
non-existent yet.
○ The deed of assignment was executed on January 24, 1964 (Exh. "G"),
while promissory note No. 11487 is dated April 25, 1966 (Exh. 'A),
promissory note 11515, dated May 3, 1966 (Exh. 'B'), promissory note
11699, on June 20, 1966 (Exh. "C").
○ At most, it was a dation in payment for P10,000.00, the amount of credit
from appellee bank indicated in the deed of assignment. At the time the
assignment was executed, there was no obligation to be extinguished
except the amount of P10,000.00.
○ Moreover, in order that an obligation may be extinguished by another
which substitutes the same, it is imperative that it be so declared in
unequivocal terms, or that the old and the new obligations be on every
point incompatible with each othe​r (​Article 1292, New Civil Code​).
● Obviously, the deed of assignment was intended as collateral security for the bank
loans of appellants, as a continuing guaranty for whatever sums would be owing by
defendants to plaintiff, as stated in stipulation No. 9 of the deed.
● In case of doubt as to whether a transaction is a pledge or a dation in payment,
the presumption is in favor of pledge, the latter being the lesser transmission of
rights and interests.
[2] WON appellee bank must first exhaust all legal remedies against the Philippine
Fisheries Commission before it can proceed against appellants for collections of loan
under the promissory notes which are plaintiffs bases in the action for collection - NO
● The obligation of appellants under the promissory notes not having been released by
the assignment of receivables, appellants remain as the principal debtors of appellee
bank rather than mere guarantors.
● The deed of assignment merely guarantees said obligations. That the guarantor
cannot be compelled to pay the creditor unless the latter has exhausted all the
property of the debtor, and has resorted to all the legal remedies against the debtor,
under NCC 2058 does not apply to them.
● It is of course of the essence of a contract of pledge or mortgage that when the
principal obligation becomes due, the things in which the pledge or mortgage consists
may be alienated for the payment to the creditor (Article 2087, New Civil Code).
● IN THIS CASE, appellants are both the principal debtors and the pledgors or
mortgagors. Resort to one is, therefore, resort to the other.
● Appellee bank did try to collect on the pledged receivables. As the Emergency
Employment Agency (EEA) which issued the receivables had been abolished, the
collection had to be coursed through the Office of the President which disapproved the
same. The receivable became virtually worthless leaving appellants' loans from
appellee bank unsecured. It is but proper that after their repeated demands made on
appellants for the settlement of their obligations, appellee bank should proceed
against appellants. It would be an exercise in futility to proceed against a defunct
office for the collection of the receivables pledged.
RULING: ​The appeal is Dismissed for lack of merit and the appealed decision of the trial court is
affirmed in toto.
SEPARATE OPINION:
Feliciano, J., concurring:
● “The character of the transactions between the parties is not determined by the
language used in the document but by their intention​.” This statement is basically
not exceptionable, so far as it goes. It might, however, be borne in mind that the
intent of the parties to the transaction is to be determined in the first instance,
by the very language which they use.
● The deed of assignment contains language which suggest that the parties
intended to effect a complete alienation of title to and rights over the receivables
which are the subject of the assignment.
○ This language is comprised of works like ​"remise," "release ​and quitclaim"
and clauses like "​the title and right of possession to said accounts
 receivable is to remain in said assignee​" who ​"shall have the right to collect
directly from the debtor.​"
○ The same intent is also suggested by the use of the words ​"agent and
representative of the assignee"​ in referring to the assignor.
● Although in its form, the deed of assignment of receivables partakes of the nature of a
complete alienation of the receivables assigned, such form should be taken in
conjunction with, and indeed must be qualified and controlled by, other language
showing an intent of the parties that title to the receivables shall pass to the assignee
for the limited purpose of securing another, principal; obligation owed by the assignor
to the assignee.
○ Title moves from assignor to asignee but that title is defeasible being
designed to collateralize the principal obligation.
○ Operationally, what this means is tha​t the assignee is burdened with an
obligation of taking the proceeds of the receivables assigned and
applying such proceeds to the satisfaction of the principal obligation
and returning any balance remaining thereafter to the assignor.
● The parties gave the deed of assignment the form of an absolute conveyance of title
over the receivables assigned​, essentially ​for the convenience of the assignee​.
● Without such formally unlimited conveyance of title, the assignee would have to treat
the deed of assignment as no more than a deed of pledge or of chattel mortgage. In
other words, in such hypothetical case, should the assignee seek to realize upon the
security given to him through the deed of assignment (which would then have to
comply with the documentation and registration requirements of a pledge or chattel
mortgage), the assignee would have to foreclose upon the securities or credits
assigned and place them on public sale and there acquire the same.
○ It should be recalled that under the p​rinciple which forbids a pactum
commisorium Article 2088, Civil Code), a mortgagee or pledgee is
prohibited from simply taking and appropriating the personal property turned
over to him as security for the payment of a principal obligation. A deed of
assignment by way of security avoids the necessity of a public sale impose
by the rule on pactum commisorium, by in effect placing the sale of the
collateral up front.
● The foregoing is applicable where, as in the present instance, the deed of assignment
of receivables combines elements of both a complete or absolute alienation of the
credits being assigned and a security arrangement to assure payment of a principal
obligation.
● Where the second element is absent, that is, where there is nothing to indicate that
the parties intended the deed of assignment to function as a security device, it would
of course follow that the simple absolute conveyance embodied in the deed of
assignment would be operative; the assignment would constitute essentially a mode of
payment or dacion en pago.
● Put a little differently, in order that a deed of assignment of receivables which is in
form an absolute conveyance of title to the credits being assigned, may be qualified
and treated as a security arrangement, language to such effect must be found in the
document itself and that language, precisely, is embodied in the deed of assignment in
the instant case. Finally, it might be noted that that deed simply follows a form in
standard use in commercial banking.
[66] PCI LEASING FINANCE V. TROJAN METAL INDUSTRIES INC.
G.R. No. 176381 | December 15, 2010 | Carpio, J.
TOPIC​: Concurrence and Preference of Credits – Cases in relation to PPSA and Concurrence /
Preference of Credits
SUMMARY​: TMI sought PCI for a loan, but instead of extending one, they offered to buy TMI’s
equipment. Then, they entered into a lease agreement, but to obtain another loan from another
financing company, TMI used the leased equipment as temporary collateral. PCI considered the
2​nd mortgage a violation of the lease agreement, so they send a demand letter, which was
unheeded. PCI filed a complaint for sum of money and replevin. TMI alleged that it was a
simulated financial lease. RTC and CA disagreed.
DOCTRINE​: ​In a true financial leasing, whether under RA 5980 or RA 8556, a finance ​company
purchases on behalf of a cash-strapped lessee the equipment the latter wants to buy but, due to
financial limitations, is incapable of doing so. The finance company then leases the equipment to
the lessee in exchange for the latter’s periodic payment of a fixed amount of rental.
FACTS​:
● Sometime in 1997, respondent Trojan Metal Industries, Inc. (TMI) came to petitioner
PCI Leasing and Finance, Inc. (PCI) to seek a loan. Instead of extending a loan, PCI
offered to buy TMI’s equipment.
● The parties executed a deed of sale for the various equipment for P2.8M.
● Then, they entered into a lease agreement, where TMI leased from PCI the
equipment subject of the sale.
○ Pursuant to the lease, TMI issued postdated checks for 24 monthly
installments.
○ Equipment rented and price: Hydraulic press (P62k), power press (P49k),
milling machine (P22k), radial drill (P22k)
○ The lease agreement required TMI to give PCI a guaranty deposit of P1M,
to secure the performance of TMI’s obligations.
○ Sps. Walfrido and Elizabeth Dizon, as TMI’s President and Vice-President,
respectively executed in favor of PCILF a Continuing Guaranty of Lease
Obligations.
● To obtain another loan from another financing company, TMI ​used the leased
equipment as temporary collateral.
● PCI considered the second mortgage a violation of the lease agreement and sent a
demand letter for TMI’s outstanding obligation.
○ At that point TMI had only paid P1.7M.
● The demand was unheeded, thus PCI filed a complaint in the RTC QC for sum of
money and replevin.
○ RTC issued the writ of replevin. Upon orders of the RTC, the sheriff took
custody of the equipment.
○ PCI sold the leased equipment for P1M.
● Respondents claimed that the sale with lease agreement was a mere scheme to
facilitate the financial lease between PCI and TMI. They explained that in a simulated
financial lease, property of the debtor would be sold to the creditor to be repaid
through rentals; at the end of the lease period, the property sold would revert back to
the debtor.
● RTC: ​held that the lease was valid and that PCI was entitled to possession of the
equipment. TMI was ordered to pay P888k (amount of unpaid obligation)
● CA: ​The sale with lease agreement was in fact a loan secured by chattel mortgage.
Since PCI already sold the equipment for P1M, had a guaranty deposit of P1M, it had
P2M, as against TMI’s P888k obligation. Thus, PCI must return the P1.1M excess to
TMI.
ISSUE/HOLDING/RATIONALE​:
1. W/N the sale with lease agreement the parties entered into was a financial lease
or a loan secured by chattel mortgage – NO.
● Arguments:
o PCI: ​the transaction was a sale and leaseback financing arrangement
where the client sells movable property to a financing company, which then
leases the same back to the client. Such is not prohibited by law.
o TMI: ​parties never intended to transfer ownership of equipment.
● Definition of Financial Leasing Under the Law: ​Financing Company Act (RA 5980)
is the governing law at the time the contract was executed. The IRR defines financial
leasing as:
o LEASING shall refer to financial leasing which is a mode of extending credit
through a non-cancelable contract under which the lessor purchases or
acquires at the instance of the lessee heavy equipment, motor vehicles,
industrial machinery, appliances, business and office machines, and other
movable property in consideration of the periodic payment by the lessee of
a fixed amount of money sufficient to amortize at least 70% of the purchase
price or acquisition cost, including any incidental expenses and a margin of
profit, over the lease period. The contract shall extend over an obligatory
period during which the lessee has the right to hold and use the leased
property and shall bear the cost of repairs, maintenance, insurance, and
preservation thereof, but with no obligation or option on the part of the
lessee to purchase the leased property at the end of the lease contract.
● The above definition gained statutory recognition in the Financing Company Act of
1998 (RA 8556).
● Thus, in a true financial leasing, whether under RA 5980 or RA 8556, a finance
company purchases on behalf of a cash-strapped lessee the equipment the latter
wants to buy but, due to financial limitations, is incapable of doing so. The finance
company then leases the equipment to the lessee in exchange for the latter’s periodic
payment of a fixed amount of rental.
● Application: In this case, however, TMI already owned the subject equipment before
it transacted with PCI, thus the transaction is not financial leasing under the law.
● Jurisprudence
o Cebu Contractors Consortium v. CA: ​where the client already owned
the equipment but needed additional working capital and the finance
company purchased such equipment with the intention of leasing it back to
him, the lease agreement was simulated to disguise the true transaction
that was a loan with security. In such instance, the intention is to extend a
loan.
o Investors Finance Corp. ​v. CA: ​The Court held that the lease agreement
was simulated to disguise the true transaction between the parties, which
was a simple loan secured by heavy equipment and machinery owned by
the borrower-lessee. The Court differentiated between a true financial
leasing and a loan with mortgage in the guise of a lease. The Court said
that financial leasing contemplates the extension of credit to assist a buyer
in acquiring movable property which he can use and eventually own. If the
movable property already belonged to the borrower-lessee, the transaction
between the parties, according to the Court, was a loan with mortgage in
the guise of a lease.
● Application: ​had the true transaction between the parties been expressed in a
proper instrument, it would have been a simple loan secured by a ​chattel ​mortgage,
instead of a simulated financial leasing. Thus, upon TMI’s default, PCI ​was entitled to
 seize the mortgaged equipment, not as owner but as creditor-mortgagee for the
purpose of foreclosing the chattel mortgage.
o The sale of equipment can be deemed in the exercise of its right to
foreclose the chattel mortgage.

2. W/N PCILF should pay TMI, by way of refund – YES, but the amount is modified.
● CA erred in the computation of the principal amount.
● Records show that PCI paid TMI P2.8M for the sale of equipment. In turn, TMI gave a
P1M guaranty deposit. Thus, the amount of the principal loan was P1.8M,
representing the amount actually received by TMI. (proceeds of sale minus deposit).
● TMI’s loan payments amounted to P1.7M. The loan payments should be deducted to
the principal amount plus interest.
● Since PCI sold the mortgaged equipment to a third party for P1M, ​the proceeds of the
said sale should be applied to offset the remaining balance on the principal loan plus
applicable interest.
● The Court remanded the case to the RTC for the computation of the total amount due
because the exact date of the sale of the mortgaged equipment, which is needed to
compute the interest on the remaining balance of the principal loan, cannot be
gleaned from the records.
● In the absence of stipulation, the applicable interest due on the remaining balance of
the loan is the legal rate of 12% per annum, computed from the date PCI sent a
demand letter to TMI (Dec. 8, 1998).
o No interest can be charged prior to this date because TMI was not yet in
default.
● In accordance with the rules laid down in Eastern Shipping Lines v. CA, the RTC
should follow this formula:

TOTAL AMOUNT DUE = [principal – partial payments made] + [interest + interest on interest],
where

Interest = remaining balance x 12% per annum x no. of years from due date (8 December 1998
when demand was made) until date of sale to a third party

Interest on interest = interest computed as of the filing of the complaint on 7 May 1999 x 12% x
no. of years until date of sale to a third party

● The P1M proceeds shall be deducted from the total amount due.
● The difference represents overpayment by TMI, which the law requires PCI to return
to TMI.

RULING​: ​Petition is denied. We ​AFFIRM with MODIFICATION​ the 5 October 2006 Decision
and the 23 January 2007 Resolution of the Court of Appeals in CA-G.R. CV No. 75855.
Petitioner PCI Leasing and Finance, Inc. is hereby ​ORDERED​ to ​PAY​ respondent Trojan Metal
Industries, Inc., by way of refund, the excess amount to be computed by the Regional Trial Court
based on the formula specified above, with interest at 12% per annum from finality of this
Decision until fully paid.
[67] Citibank N.A. v. Investors Finance Corporation vs. Sabeniano, supra at 493
G.R. No. 156132 | February 6, 2007 | Chico-Nazario, J.
PROVISIONS APPLICABLE:
Article 1250, CC: In case an ​extraordinary inflation or deflation of the ​currency stipulated
should supervene, ​the value of the currency at the time of the establishment of the
obligation shall be the basis of payment, ​unless​ there is an ​agreement to the contrary.
SUMMARY: ​Respondent incurred a loan with Petitioner Citibank, and the latter offset the loans
using the former’s savings and dollar accounts. The Court affirmed the decision of the lower
courts that the setoff was illegal and thus, null and void, and that the Citibank must refund the
value of the dollar accounts at the time of the constitution of the obligation since there was no
extraordinary inflation.
DOCTRINE:
Definition of inflation - ​Inflation has been defined as ​the sharp increase of money or credit
or both without a corresponding increase in business transaction. There is inflation when
there is an increase in the volume of money and credit relative to available goods resulting in a
substantial and continuing rise in the general price level.
Burden of proof - ​The burden of proving that there had been extraordinary inflation or deflation
of the currency is ​upon the party that alleges it​. Such circumstance must be ​proven by
competent evidence,​ and it ​cannot be merely assumed.
Competent evidence - ​The existence of extraordinary inflation must be ​officially proclaimed
by competent authorities, and the only competent authority so far recognized by this Court to
make such an official proclamation is the ​BSP.
Equity - A ​ rticle 1250 of the Civil Code is based ​on equitable considerations. ​Among the
maxims of equity are (1) ​he who seeks equity must do equity​, and (2) ​he who comes into
equity must come with clean hands. The latter is a frequently stated maxim which is also
expressed in the principle that he who has done inequity shall not have equity​.
FACTS:
● Respondent was a client of the petitioners. She had several accounts:
○ Savings account with Citibank-Manila
○ Money market placements with FNCP Finance
○ Dollar accounts with the Citibank Geneva.
● Respondent failed to pay the loans incurred through Citibank Manila.
○ The loans aggregated to PhP 1,920,000.00, which were due and
demandable by May 1979.
○ Thus, petitioner Citibank used respondent’s deposits and money market
placements to off-set and liquidate her outstanding obligations.
● Respondent denied having any outstanding loans with Citibank, and claimed that she
was not informed of the off-setting using her accounts.
○ RTC ruled that the setoff was null and void, then ordered the Sabeniano to
pay the outstanding loan with no interest and penalty charges from the time
the illegal setoff was effected.
ISSUES w/ HOLDING & RATIO:
PRELIMINARY ISSUE (not really related to the topic but important to know before
proceeding to the main issue)
Validity of the offset from the Dollar Accounts
● Citibank cannot offset Sabeniano’s local obligation using her Foreign account,
even if they are the under one principal bank (Citibank of New York).
● Sec. 25 of the US Federal Reserve Act – The accounts of the foreign branches of an
American Bank shall be conducted independently of each other.
3 SO ORDERED.
OG digest by David Pascua 
o Citibank’s head office is from NY, so this law should apply with respect to
the Manila and Geneva branches of Citibank.
o Hence, ​Citibank cannot use the Geneva dollar account to satisfy
Sabeniano’s obligation with Citibank-Manila.
MAIN ISSUE: ​Refund of the dollar deposit
● Value of the ordered refund for the dollar deposit should use the exchange rate at the
time of the decision, not from the establishment of the obligation.
W/N there was inflation so as to warrant the application of Art. 1250 – NO.
● NO. Article 1250 is not applicable because the petitioners were not able to prove
inflation.
● Article 1250 only applies when there is extraordinary inflation or deflation of the
currency.
o Inflation has been defined as ​the sharp increase of money or credit or
both without a corresponding increase in business transaction. There
is inflation when there is an increase in the volume of money and credit
relative to available goods resulting in a substantial and continuing rise in
the general price level.
o The burden of proving that there had been extraordinary inflation or
deflation of the currency is ​upon the party that alleges it​. Such
circumstance must be ​proven by competent evidence, and it ​cannot be
merely assumed.
● In the case at bar, petitioners were not able to prove inflation.
o Petitioners presented no proof as to how much the price index of goods and
services had risen during the intervening proof. The only information they
provided was the drop of US dollar-Peso exchange rate.
o BSP did not categorically declare that the same constitute as an
extraordinary inflation.
▪ The existence of extraordinary inflation must be officially
proclaimed by competent authorities, and the only competent
authority so far recognized by this Court to make such an official
proclamation is the BSP
W/N the petitioners can invoke Art. 1250 on the basis of equity – NO.
● The petitioners cannot invoke Article 1250 because they did not come to the court with
clean hands.
o since the offsetting that they did was against the US Federal Reserve Act
● Article 1250 of the Civil Code is based ​on equitable considerations. ​Among the
maxims of equity are (1) ​he who seeks equity must do equity​, and (2) ​he who
comes into equity must come with clean hands. The latter is a frequently stated
maxim which is also expressed in the principle that he who has done inequity shall not
have equity
● In this case, the delay in the recovery by the respondent of her dollar-account was due
to the unlawful act of Citibank of using the same to liquidate her loans.
● Therefore, ​petitioner Citibank should refund to respondent the U.S. $149,632.99
taken from her Citibank-Geneva accounts, or its equivalent in Philippine currency
using the exchange ​rate at the time of payment, ​plus the stipulated interest for each
of the fiduciary placements and current accounts involved, beginning 26 October
1979.
Ruling: IN VIEW OF THE FOREGOING, petitioners’ Motion for Partial Reconsideration of
this Court’s Decision, dated 16 October 2006, and respondent’s Motion for this Court to
declare the same Decision already final and executory, are both DENIED for lack of merit.
[68] J.L. BERNARDO CONSTRUCTION v. CA
G.R. No. 105827; January 31, 2000; Gonzaga-Reyes, J.
TOPIC: ​[XII.] Concurrence and Preference of Credits; [I.] Cases in relation to PPSA and
Concurrence/Preference of Credits
SUMMARY: ​San Antonio Mun. Government approved the construction of a public market. ​JL
Bernardo Construction won the bid and was awarded the contract. Petitioners claim that under
the contract, the municipality agreed to assume the expenses for the demolition and clearing of
the site. The municipality refused to do so after repeated demands, thus the petition for breach
of contract and specific performance. ​RTC ruled in favor of the petitioner. ​CA ruled in favor of
the municipality.
SC: The action filed by petitioners in the trial court does not partake of the nature of an
insolvency proceeding. It is basically for specific performance and damages. Thus, even if it is
finally adjudicated that petitioners herein actually stand in the position of unpaid contractors and
are entitled to invoke the contractor’s lien granted under ​Art. 2242​, such lien cannot be enforced
in the present action for there is no way of determining whether or not there exist other preferred
creditors with claims over the San Antonio Public Market. The records do not contain any
allegation that petitioners are the only creditors with respect to such property. The fact that no
third party claims have been filed in the trial court will not bar other creditors from subsequently
bringing actions and claiming that they also have preferred liens against the property involved.
DOCTRINE
● Arts. 2241 & 2242, CC enumerates certain credits which enjoy preference with respect
to specific personal or real property of the debtor. Specifically, the contractor’s lien
claimed by petitioners is granted under ​Art. 2242(3) which provides that the claims of
contractors engaged in the construction, reconstruction or repair of buildings or other
works shall be preferred with respect to the specific building or other immovable
property constructed.
o However, ​Art. 2242 only finds application when there is a concurrence of
credits, i.e. when the same specific property of the debtor is subjected to the
claims of several creditors and the value of such property of the debtor is
insufficient to pay in full all the creditors. In such a situation, the question of
preference will arise, that is, there will be a need to determine which of the
creditors will be paid ahead of the others. Fundamental tenets of due
process will dictate that this statutory lien should then only be enforced in
the context of some kind of a proceeding where the claims of all the
preferred creditors may be bindingly adjudicated, such as insolvency
proceedings.
o This is made explicit by ​Art. 2243 which states that the claims and liens
enumerated in ​Art. 2241 & 2242 shall be considered as mortgages or
pledges of real or personal property, or liens within the purview of legal
provisions governing insolvency.
RELEVANT PROVISION(S)
FACTS
● In 1990, the San Antonio Municipal Government of Nueva Ecija approved the
construction of the San Antonio Public Market.
o It was supposed to be funded by the Economic Support Fund Secretariat
(ESFS).
o Under the ESFS grant-loan-equity program, the market would be funded by
a grant from ESFS, loan extended by ESFS and equity (or counterpart
funds) from the municipality.
● Petitioners claimed that they entered into a business venture to participate in the
bidding of the public market.
o Thus, JL Construction, the sole proprietorship owned by Bernardo, through
Santiago Sugay submitted its bid together with other qualified bidders.
o They won and were awarded the contract.
▪ A construction agreement was then entered into by the
municipality and JL Bernardo Construction through respondent
Salonga, the then incumbent mayor.
● Petitioners claim that under the contract, the municipality agreed to assume the
expenses for the demolition, clearing and site filling of the construction site worth
P1.15M and to give cash equity of P767K, both amounts to be remitted directly to
petitioners.
o Petitioners then allege that these amounts became due, but the municipality
refused to pay despite repeated demands and despite the market being
98% complete.
o They allege that Salonga induced them to advance expenses by making
representations that the municipality had the financial capability to
reimburse them.
● In 1991, petitioners filed for breach of contract, specific performance and collection of
sum of money, with prayer of preliminary attachment and enforcement of contractor’s
lien against the municipality and Salonga in his official and personal capacity.
● RTC​ granted the preliminary attachment.
o It also granted JL Bernardo Construction the right to possession of the
market and operate the same. It gave credence to the alleged fraud.
o With regard to the contractor’s lien, the RTC said that since petitioners have
not been reimbursed for the cash equity and for the demolition, clearing and
site expenses, they stand in the position of an unpaid contractor, then they
are an unpaid contractor which entitles them to ​Arts. 2242 & 2243, CC to a
lien worth 2.6 million pesos (as of Aug 1, 1991), excluding other damages.
o It explained that although the usual way is to enforce a lien is by a decree
for the sale of the property and the application of the proceeds to the debt, it
is more practical to permit petitioners to operate the market and apply their
claims the income (rentals and goodwill of prospective stallholders) derived
therefrom.
● MR was denied so petitioners filed a certiorari to the CA which favored them.
● CA held that ​Art. 2242 is applicable in the context of insolvency proceedings, as
expressly stated in ​Art. 2243​.
o Even if petitioners are entitled to possession, the same right cannot be
expanded to the right to use the building. The grant for petitioners to operate
the market amounts to grave abuse of discretion.
● Petitioners now in SC assailing CA’s decision with regard to the contractor’s lien.
ISSUE(S)/HELD
WON petitioners can operate the market and apply the proceeds to their credit. – NO
● Arts. 2241 & 2242 enumerates certain credits which enjoy preference with respect to
specific personal or real property of the debtor.
o The petitioners’ claimed contractor’s lien is granted under ​Art. 2242(3) which
provides that the claims of contractors engaged in the construction,
reconstruction or repair of buildings or other works shall be preferred with
respect to the specific building or other immovable property constructed;
o BUT, ​Art. 2242​ applies only when there is a concurrence of credits;
▪ i.e. when the same specific property of the debtor is subjected to
the claims of several creditors and the value of such is insufficient
to pay in full all creditors;
 ▪ In such case, the question of preference will arise, that is, to
whom of the creditors shall be first;
o Due process dictates that this statutory lien should be enforced only in the
context of a proceeding where the claims of all preferred creditors may be
bindingly adjudicated; such as insolvency proceedings;
o Art. 2243 explicitly states that the claims and liens in ​Arts. 2241 & 2242 shall
be considered as mortgages or pledges of real or personal property, or liens
within the purview of legal provisions governing insolvency.
● Petitioners’ suit is not in the nature of insolvency proceedings.
o It’s basically specific performance and damages.
▪ Thus, although they are unpaid contractors and are entitled to
contractor’s lien, such lien cannot be invoked in the present action
for it cannot be determined whether there are other preferred
creditors with claims over the market.
o The allegations do not show that petitioners are the only creditors with
respect to such property.
o Although no third party claims have been filed, it will not bar other creditors
from filing subsequent actions and claim they have preferred liens.
● Since it is not alleged that petitioners have rights as mortgagee under the contract,
they could only obtain possession and use of the market by means of preliminary
attachment upon such property, in the event that they obtain favorable judgment from
the trial court:
o (1) Under the rules, a writ of attachment (over registered real property) is
enforced by the sheriff by filing with the registry of deeds a copy of the order
of attachment, together with a description of the property, and by leaving a
copy of such order, description and notice with the occupant, if any;
o (2) If a favorable judgment is obtained by the attaching party and an
execution is issued, the sheriff may satisfy the judgment by selling so much
of the property to satisfy the judgment;
o (3) Only in the event that petitioners are able to purchase the property will
they then acquire the possession and use of the same;
o (4) Trial court’s decision clearly was not in line with procedure so it
committed grave abuse of discretion.

DISPOSITIVE: ​WHEREFORE, CA is AFFIRMED insofar as it nullifies the contractor’s lien.

CA is REVERSED in nullifying the writ of attachment by the trial court.
[69] Cordova vs. Reyes Daway Lim Bernardo Lindo Rosales Law Offices
GR No. 144516 | July 3, 2007 | Corona, J.
SUMMARY: ​In 1981, when public respondent SEC placed Philfinance under receivership,
private respondent who were appointed as liquidators, withdrew the CSPI shares owned by
Cordova that were previously delivered by Philfinance to the custodian banks (Filmanbank and
Philtrust Bank), and sold the said shares to Northeast Corporation. Cordova filed a complaint for
the return of the shares amounting to P33.75 million. SEC ordered the private respondents to
pay Cordova apporximately P5 million, representiing 15% of his CSPI shares w/o interest. The
CA affirmed the SEC. The SC affirmed, agreeing with the SEC and CA that Cordova became an
ordinary creditor of Philfinance under Art. 2245 of the NCC, after the CSPI shares, specific or
determinate movable properties, were sold and the money raised from the sale became generic
and commingled with the cash and other assets of Philfinance. Also, under Art. 2251(2),
Cordova was entitled to a rate of recovery of only 15% of his money claim, just like all the
ordinary creditors of Philfinance. Lastly, Cordova was not entitled to any interest under the law
and jurisprudence.
DOCTRINE: ​Article 2241 refers only to specific movable property. Claim for the payment of
money, is generic property and not specific or determinate. Considering that petitioner did not
fall under any of the provisions applicable to preferred creditors, he was deemed an ordinary
creditor under Article 2245: “Credits of any other kind or class, or by any other right or title not
comprised in the four preceding articles, shall enjoy no preference.” This being so, Article 2251
(2) states that: Common credits referred to in Article 2245 shall be paid pro rata regardless of
dates.
PROVISIONS:
NCC, Art. 2241(2). ​“With reference to specific movable property of the debtor, the following
claims or liens shall be preferred: (2) Claims arising from misappropriation, breach of trust, or
malfeasance by public officials committed in the performance of their duties, on the movables,
money or securities obtained by them;
NCC, Art 2245. ​“Credits of any other kind or class, or by any other right or title not comprised in
the four preceding articles, shall enjoy no preference.”
FACTS:
● Sometime in 1977 and 1978, Cordova bought from Philippine Underwriters Finance
Corporation (Philfinance) certificates of stock of Celebrity Sports Plaza Incorporated
(CSPI) and shares of stock of various other corporations. He was issued a
confirmation of sale.
● The CSPI shares were physically delivered by Philfinance to the former Filmanbank
and Philtrust Bank, as custodian banks, to hold these shares on behalf of and for the
benefit of Cordova
● June 18, 1981: Philfinance was placed under receivership by the SEC. Thereafter,
private respondents Reyes Daway Lim Bernardo Lindo Rosales Law Offices and Atty.
Wendell Coronel (private respondents) were appointed as liquidators
● Sometime in 1991: Without the knowledge and consent of Cordova and without
authority from the SEC, private respondents withdrew the CSPI shares from the
custodian bank.
● May 27, 1996: Private respondents sold the shares to Northeast Corporation (NC) and
included the proceeds thereof in the funds of Philfinance.
● September 10, 1996: It was only then that Cordova knew of the sale, and upon
knowledge of this fact, filed a complaint with the SEC but since it was not acted upon,
he filed a formal complaint against SEC in the receivership proceedings with the SEC,
for the return of the shares.
● April 18, 1997: SEC approved a 15% rate of recovery for Philfinance’s creditors and
investors.
● May 13, 1997: The liquidators began the process of settling the claims against
Philfinance, from its assets.
● SEC dismissed the petition, initially. However, upon reconsideration, granted
the claims of Cordova.
○ Cordova was the owner of the CSPI shares by virtue of a confirmation of
sale. But since the shares had already been sold and the proceeds
commingled with the other assets of Philfinance, petitioner’s status was
converted into that of an ordinary creditor for the value of such shares.
○ Private respondents to pay PET 15% of the monetary value of the shares
(P5,062,500) plus interest o
■ However, SEC issued an order deleting the award of interest. It
clarified that it never meant to award interest since this would be
unfair to the other claimants.
● CA ​affirmed the decision of the SEC and agreed that petitioner was indeed the owner
of the CSPI shares but the recovery of such shares had become impossible. It also
declared that the clarificatory order merely harmonized dispositive portion with the
body of the resolution. MR was also denied.
ISSUE/RATIO:
1. W/N Cordova was a preferred/ordinary creditor of Philfinance. – ORDINARY
CREDITOR
● There is no dispute that Cordova was the owner of the CSPI shares. However, we
recall that private respondents as liquidators of Philfinance illegally withdrew
said certificates of stock without the knowledge and consent of petitioner and
authority of the SEC. After selling the CSPI shares, private respondents added the
proceeds of the sale to the assets of Philfinance.
● SC agrees with both the SEC and the CA that PET had become an ordinary
creditor of Philfinance.
● Petitioner’s CSPI shares were specific or determinate movable properties. But after
they were sold, the money raised from the sale became generic and were commingled
with the cash and other assets of Philfinance. Unlike shares of stock, money is a
generic thing.
○ This means that once a certain amount is added to the cash balance, one
can no longer pinpoint the specific amount included which then becomes
part of a whole mass of money.
○ It thus became impossible to identify the exact proceeds of the sale of the
CSPI shares since they could no longer be particularly designated nor
distinctly segregated from the assets of Philfinance.
○ Petitioner’s only remedy was to file a claim on the whole mass of these
assets, to which unfortunately all of the other creditors and investors of
Philfinance also had a claim.
● [Definition of claims] Finasia v CA:​ “claims” in the context if liquidation proceedings
refers to debts or demands of a pecuniary nature; the assertion of a right to have
money paid.
○ It also means “Right to payment, whether or not such right is reduced to
judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured,
disputed, undisputed, legal, equitable, secured, or unsecured; or right to an
equitable remedy for breach of performance if such breach gives rise to a
right to payment, whether or not such right to an equitable remedy is
reduced to judgment, fixed, contingent, matured, unmatured, disputed,
undisputed, secured, unsecured.”
○ In the case at bar, undoubtedly, ​petitioner had a right to the payment of
the value of his shares. His demand was of a pecuniary nature since he
was claiming the monetary value of his shares. It was in this sense (i.e. as a
claimant) that he was a creditor of Philfinance.
 2. W/N petitioner can recover the full value of his CSPI shares or merely 15%
thereof like all other ordinary creditors of Philfinance- 15% ONLY.
● Cordova argues that he was a preferred creditor because private respondents illegally
withdrew his CSPI shares from the custodian banks and sold them without his
knowledge and consent and without authority from the SEC.
● He bases his claim in Art 2241 (2), and as such preferred creditor, he was
entitled to the entire amount:
○ Art. 2241 (2): “With reference to specific movable property of the debtor, the
following claims or liens shall be preferred: (2) Claims arising from
misappropriation, breach of trust, or malfeasance by public officials
committed in the performance of their duties, on the movables, money or
securities obtained by them;
● SC disagrees. Art. 2241 refers only to specific movable property. His claim was
for the payment of money, which is generic​. As such, since he does not fall under
preferred creditors, he is deemed an ordinary creditor under Art 2245: “Credits of any
other kind or class, or by any other right or title not comprised in the four preceding
articles, shall enjoy no preference.”
○ Under Art 2251 (2): “Common credits under Article 2245 shall be paid pro
rata regardless of dates.”
○ Hence, like all the other ordinary creditors or claimants against Philfinance,
he was entitled to a rate of recovery of only 15% of his money claim.

3. W/N Cordova was entitled to legal interest - ​NO.

● SEC argued that awarding interest to petitioner would have given petitioner an unfair
advantage or preference over the other creditors
● Cordova responds that under Art 2209, CC, he was entitled to 12% legal interest per
annum. from the time he was deprived of the shares until fully paid.
● SC reiterated the guidelines for interest in Easter Shipping Lines v CA:
○ When the obligation is breached, and it consists in the payment of a sum of
money, i.e., a loan or forbearance of money -> 12% p.a.
○ When an obligation, not constituting a loan or forbearance of money, is
breached -> 6% p.a.
● Under this ruling, petitioner was not entitled to legal interest of 12% per annum (from
demand) because the amount owing to him was not a loan or forbearance of money.
● Neither was he entitled to legal interest of 6% per annum under Article 2209 applies
only when there is a delay in the payment of a sum of money.
○ Cordova himself said before the CA that the SEC (as liquidator) had already
paid him P5,062,500.
● Accordingly, petitioner was not entitled to interest under the law and current
jurisprudence.
● Considering that petitioner had already received the amount the obligation of the SEC
as liquidator of Philfinance was totally extinguished. We note that there is an
undisputed finding by the SEC and CA that private respondents sold the subject
shares without authority from the SEC. Petitioner evidently has a cause of action
against private respondents for their bad faith and unauthorized acts, and the resulting
damage caused to him.
RULING: Petition is DENIED.